QUI TAM PRACTICE UNDER THE FEDERAL FALSE CLAIMS ACT
ZACHARY KITTS
K&G LAW GROUP, PLLC
The federal False Claims Act is the single most important tool used to deter fraud on the federal government. In general terms, the FCA makes seven types of broadly-defined misconduct in relation to federal funds illegal and imposes treble damages and civil penalties against any "person" breaking the law. The real power of the statute, however, lies in its unique qui tam provision which empowers private individuals with knowledge of fraud on the government to hire private counsel and sue in their own name as well as on behalf of the United States. Such individuals are entitled to receive an award of between 15% and 30% of the government’s recovery as well as attorney's fees, costs and expenses.
The term qui tam comes from the Latin phrase "he who sues on behalf of the King, as well as for himself.” In other words, the FCA is no mere fraud hotline to report unethical behavior – the FCA gives any person the right to file a full-blown federal lawsuit on behalf of the United States. Because qui tam relators (or whistleblowers as they are sometimes called) bring claims on behalf of the United States in court, they must be represented by licensed counsel.
In all cases, the interests of qui tam whistleblower are represented by private counsel, while the interests of the United States are represented by the United States Department of Justice. By creating incentives for individuals with first-hand information to hire private counsel and litigate cases in conjunction with federal prosecutors, the statute creates a true public-private partnership between industry insiders with knowledge of fraud, private practice lawyers specializing qui tam litigation, and federal prosecutors. This public-private partnership has been an unparalleled success. The Department of Justice has collected billions of dollars in FCA prosecutions, and qui tam whistleblowers have been paid hundreds of millions of dollars for their efforts.
Such recoveries are by no means easy or quick. In addition to understanding the complex needs of modern government and the commercial entities servicing those needs, qui tam litigation has a number of unusual requirements not found in other types of federal civil litigation. Those requirements – many of which are jurisdictional – include a pre-filing disclosure memorandum, a heightened pleading standard for the Complaint, and a number of unusual procedural hurdles such as filing the Complaint under seal. And, of course, working with the Department of Justice has its own nuances that must be successfully navigated.
The success of the federal FCA has caused state governments to take an interest, and to date 30 state governments and the District of Columbia have enacted some form of FCA-style statute. In addition to the obvious uses of such statutes – most prominently, the Medicaid program is funded at least in part by all states, and the federal FCA can only be used to recover federal money – states have their own unique areas of FCA practice, such as state qui tam actions to recover unclaimed property illegally withheld from the states by banks, credit unions, insurance companies, and so forth.